Ask the Readers: Is credit monitoring worth the money?

Reader Bryce wrote to us this week with this question for the readers: “What are your thoughts on companies like freecreditreport.com, where they charge $16.95/month to have access to your Experian credit report? Is checking your credit weekly/monthly worth the $16.95/month?”

First of all, you are legally entitled to one free credit report per year from each of the main credit reporting companies, Equifax, Experian and TransUnion. You can get them via the government’s official site, annualcreditreport.com. If you get one every four months, you are effectively monitoring your own report for free.

In most cases, you will have to pay for your credit score. It costs around $12.95. There are several instances when you can get a free credit score, thanks to the Dodd-Frank Act (on page 13 of this PDF). These cases are due to “adverse actions”:

When you’ve been denied credit

When you’ve been denied insurance

When you’re required to pay a higher deposit (such as for a utility company)

When you have to pay a higher interest rate

When you’re required to have a co-signer on a loan

If one of these actions happens to you when you apply for credit or insurance, the lender is required to tell you what credit score they were using.

Everyone should check their credit report regularly. It’s a good way to monitor for identity theft and to be sure there is no erroneous information on your report that could impact your credit score. If you do find false information, you can dispute it online with the credit bureau. Whichever credit bureau you file your dispute with must share that information with the other two.

As for paying a monthly fee to monitor your credit report, I’m in the camp that says it’s not worth your money. However, some personal finance experts believe there are benefits to paying. Lynnette Khalfani-Cox, “The Money Coach,” who writes about credit for AARP.org, is a proponent of credit monitoring. Here are her reasons: Credit monitoring is a credit education tool, it can save you money by helping you raise your credit score, and it can help prevent identity theft or at least alert you to a problem early.

Certainly if you know you’re going to be applying for a mortgage in the coming year, you should be monitoring your credit in order to boost that score so you get the best mortgage rate.

Back to Bryce’s original question about freecreditreport.com and other similar outfits: Several years ago, the Federal Trade Commission cracked down on these organizations after consumers complained about being enrolled in a membership program that wasn’t clearly disclosed. If you look at the freecreditreport.com website now, you’ll see at the top of the page disclosure that explains exactly what you’re signing up for.

IMPORTANT INFORMATION
When you order your $3.99 Credit Report and Score here, you will begin your 7-day trial membership in freecreditreport.com. If you don’t cancel your membership within the 7-day trial period*, you will be billed $19.99 for each month that you continue your membership. You may cancel your trial membership anytime within the trial period without charge.

Other online services, such as CreditSesame.com and CreditKarma.com, are free. CreditSesame.com monitors your credit information from Experian; CreditKarma.com uses TransUnion data. They use this data to create an estimate of your credit score. The scores they provide are not FICO scores, but users say they’re pretty close to the FICO three-digit number.

So, readers, what do you think of these credit monitoring programs? Are they worth the money? Can you get the same result using a free service? For those who refuse to use loans, are you at all concerned about maintaining a good credit score? Tell us your experience with credit monitoring programs and help Bryce make his decision.

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Credit score monitoring is something that I’ve come to really appreciate. It has helped me deflect several attempts to hijack my credit and I am sure that without the additional layer of protection, I would be in a world of financial hurt. The one question I would ask anybody is, “why wouldn’t you monitor your credit!?” This is where my help is http://scoredriven.com/

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credit monitoring

According to these things most credit monitoring agencies advertise that they provide regular credit check to notify you of changes in your credit report. These include creation of new accounts, changes in address related to your credit report, and huge purchases. Thanks for nice post.

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TheGooch

I think they are great when you are doing credit repair to boost your score for an upcoming loan or credit card application. Once you are done, you can freeze your credit and unfreeze when you want to get your free quarterly report.

I’m going to buy a home about a year from now, and I know most of what I have to do to boost my score, but without at least monthly credit report updates, I won’t know if my report is update the way it should, or if I need to call the institutions for find out why the didn’t update my account standing say, after receiving, a payment in full.

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Steve@identity monitor

I think that if you are monitoring your credit in hopes of preventing identity theft then you need to consider what you are actually paying for. Yes, most identity protection products will monitor credit for you. Can you do it for free? Certainly, as that as been previously stated. I pay a monthly fee for the piece of mind that in the event of an identity theft issue, I will have a third party step in and resolve it for me. It is far too time consuming to deal with issues like that on your own and for this I would rather pay 12 dollars a month and be covered. I don’t view it as paying for a service to monitor my credit score, just to help in the event that I need it.

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Mike @ Credit Flare

I don’t think the monthly credit reporting is the main appeal to these monitoring services. Having someone keep an eye on your credit and notify you if there is any suspicious activity on your credit cards, social security number, etc. is what makes these services stand out. Even CreditKarma.com has a free monitoring service, so you don’t really even have to pay for one. Some of the others are more comprehensive than the CreditKarma service. Hope it’s ok to paste a link here, but we did a comparison of the best credit monitoring services for 2013. http://www.creditflare.com/top-10/top-10-credit-monitoring-services. It might help some people who want to see a feature and price comparison.

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Nick

I don’t think it is worth it to pay that much for a company to monitor it. You can get 3 free ones a year, so get them every 4 months. If you have been having issues with identity theft, or if you have a common name (i.e. John Smith), then it might make a little more sense for you to have it.

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Meghan

My credit union does a score check every quarter and it is available in online banking. I believe they pull Transunion. Maybe you can also get your scores for free by depositing money to open a savings account?

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AZ Joe

My wife got a year of free credit monitoring because someone hacked into a data base and stole her (and lots of other people’s) personal information. Last week someone fraudulently tried to charge on one of our credit cards. Fortunately, the bank caught it, notified us and cancelled the card. A few days later the credit monitoring people sent her a letter telling her there have been no problems with her credit. Hummm……

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Stephen

This is a topic I’ve often wondered about. As it would just seem more cost effective to just pay the one time fee for every additional time you needed to check your score rather than being tricked into a $20 per month fee.

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Jim

Not worth it during periods of status quo. In times of simple maintenance of finances, CreditKarma, CreditSesame, and Quizzle, plus your three free full annual reports (one from each bureau) is plenty to monitor for any changes, just make sure you turn on the email alerts. I do all this, plus I do MyFICO $5/mo daily monitoring and quarterly FICO score update.

During times of risk, such as preparing credit for applying for a new loan, divorce, or if free monitoring indicates potential identity theft or fraud – then full-on monitoring is worth it. When all is back to status quo, then, drop that expense. It has value, and it is, unfortunately, an exchange of money for something you do not have access to.

Lifelock and their competitors are a convienience-fee business. You can do everything they do yourself for free, and their insurance is so tightly actualized that most identity theft successes while locked are not covered. The insurance is virtually worthless, so its all about convenience.

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Julie @ Freedom 48

I would never pay a monthly fee to monitor my credit report, but I do make a point of requesting my report from both Equifax and Trans Union once a year (for free). The free reports show all open accounts and my credit history… but every few years I’ll pay the $10 fee to get my actual numerical credit score. I like to know where I stand =)

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Tyler Karaszewski

no.

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Meghan

No way would I pay for what I could find out for free. Sure, it may not be an immediate notification, but you still have rights. I signed up for a free service after my employer accidentally sent out our social security numbers (employer paid) and I don’t see the value. Like someone else said above, it’s just another drain on your checking account. Be prudent, not paranoid.

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Kim

I get one of my reports (from the 3 agencies) every 4 months just to keep an eye on things (esp when the X has messed up something with a late payment for something still in both of our names – ugh). I also like Credit Sesame (FREE). It sends my credit score (just learned it’s an estimate, but good enough for me since you say it’s close) weekly or so. My score goes up and down a few points for reasons I don’t understand, but it’s still excellent so I’m happy.

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Stacie

I also do the free checks. Mostly because I’m trying to get rid of all my loans anyway so I’m not “needing” perfect credit right now. I just want to check every now and then to make sure something totally whacky is not happening.

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Kelly@Financial-Lessons

I think you pretty much answered the question in the second or third paragraph. Everyone is entitled to a free credit report from each of the three bureaus once a year. If you plan it out correctly, you can acquire one every four months for free, stay up to date with your credit report and not have to pay money for a program like that.

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Keith and Kinsey’s Real Estate Update

I have used CreditKarma.com in the past. It’s free and works great for keeping an eye on things. However, I’m not a big fan of the use of credit in general. At this point, I plan to just put a freeze on my credit file, and never borrow money again. 🙂 Living debt free (except a a mortgage which is getting paid aggressively) is awesome!

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BrentABQ

Never worth it. You get plenty of free reports (1 in each agency per year). You can freeze your whole credit or individual accounts for free. You can place watches for free. And even the best service won’t PREVENT it from happening. You still have to do all the work should fraud happen. Don’t get lazy about it, just get organized. Set yourself reminders, actively review your accounts, and setup email alerts for accounts you don’t normally use. This kind of service is just like those horrible bank fees. $3.50 for “account maintenance”. Find the free alternative. If you’re time is worth more than the 5 min it takes, hire a virtual personal assistant to do it for you, along with tons of similar things.

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Samantha

I don’t think its a scam necessarily, because they are monitoring your report for you if thats what you want. But its not very frugal, definitely.

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Janice

Total waste of time and a scam in itself. Use free services, keep on top of your banking and credit card accounts (I check mine everyday. Takes a few seconds literally and if I see anything shady, I’m on top of it). Why for-profit shills for the bank/credit card industry have been allowed to have such a stranglehold over consumer credit is beyond me, when all they do is perpetuate the use of unsecured credit, but then everyday I’m constantly amazed at something, so why should this be any different.

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Art

I’m retired and my life is pretty stable – I don’t plan to take out any loans or new credit cards in the next few years, so my wife and I froze our credt with all 3 agencies. Here in Michigan I think it cost $10 per agency. If you have had identity theft problems or live in some states, it’s free. Freezing gives us 99.9% assurance against identity theft. We can always temporarily in-freeze if we need to get new credit (existing accounts are not affected). Cheap peace of mind!

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Laura

Thanks for the reminder that it’s time to check my credit report. I aim for a check every 4 months (I’m behind).

I’m also interested in exploring a credit freeze (see http://en.wikipedia.org/wiki/Credit_freeze for explanation). I’m not sure if I have to unfreeze it every time I want to check it (probably – I’m guessing it varies by state law) but it’d still be worth it to me. Credit freezes are best if you’re not anticipating shopping for a mortgage or loan. I’m interested in hearing from anyone who’s done a credit freeze and what their experience was.

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Kate

I froze my credit more than a year ago. Very easy to do, mostly online. You do have to freeze separately with each of the three credit reporting agencies, and I think I paid about $10 each for the freezes.

You CAN view your own credit report without unfreezing. So can current creditors. But they can’t make changes – I phoned Chase to get my credit limit raised on a current card, and they couldn’t approve the increase unless I unfroze my credit (I didn’t).

You might have to unfreeze for job- or rental-related background checks or purchasing insurance, as well as taking out new loans or lines of credit (including store credit cards or financing). I haven’t changed jobs, loans or anything else since freezing, and renewing my auto insurance didn’t require unfreezing.

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Toya

I do use FreeCreditReport.com for the reason the article mentioned, my plans of purchasing a home in the next 6 months. Because I’m a financial novice, monitoring my credit monthly has educated me on some of the mistakes I’ve made in bill paying, inquiries and other actions that have negatively impacted my credit score. I’ve also learned how to boost my credit score which has increased 100 points in less than a year. Like most of you, I was annoyed at the cost so I attempted to cancel the subscription. At doing so, they reduced my monthly payment to about $8 and I get all 3 reports free every 3 months. I considered the free services but was concerned about re-entering all of my personal information on yet another site so I stuck with the one I have. After I purchase the home, I do plan to scale back on checking my report but for now, it’s paying off.

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Golfing Girl

Total waste and a scam. Most states have the option to freeze your credit and unfreeze it for free or very cheap fees compared to monitoring services (usually free for seniors). My state (North Carolina) does it for free for all 3 credit reporting agencies so we simply keep a freeze in place until we need something (recently thawed it for a month to get a Sam’s Club card and get preapproved for a new mortgage). If your credit is frozen, even if someone has your info they can’t do anything with it.

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Samantha

Thats true in Ohio as well.

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jessica

thank you so much for mentioning this. I live in NC as well, but I had never heard of credit freezing. I looked it up after reading your comment and I am very excited about it. They should have public service announcements!

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Linda

I use Credit Karma for free. I think it is great. It actually gives you a lot of information, including all open accounts. It also tells you where your problems are, calculates utilization, etc. The score they give was actually been very close to the one the bank told me when I recently refied.

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Michelle

I used to pay for this, but not lately. When I was younger, my identity was stolen. Someone bought a house in my name when I was only 13! After I found out about that (years later), I was super careful about everything and checked my credit report like a hawk.

I feel your pain. I watch my credit like a hawk, especially now that I have fallen victim to ID theft.

I learned a painful lesson when someone filed a federal and state return, using my social security number, in 2012. As a homeowner, I sought help from my homeowner’s insurance.

I am unlucky and lucky at the same time. Since March, I have worked with a company called IDT911, to combat every fraudulent use of my SSN (at least 20 instances in 2012). To date, I have lost less than $15 to identity thieves. I will not allow them to win anything.

My lesson to everyone is based in something J.D. Roth said a few years ago: “No one cares as much about your money as you do.” Monitor your reports for free until trouble strikes. Then, enlist the pros to help you fight off the thieves. Care about your credit — it’s a HUGE deal.

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Laura

Steve – this is something I do worry about – not just identity theft in general but of having my tax refund stolen. I’d love to see a reader’s story about how they dealt with identity theft from a fraudulent tax return being filed on them – maybe think about writing something up and submitting to GRS?

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Cat

I used to monitor my credit report all the time. By signing in and requesting a free one from each of the agencies every 4 months (put reminders in your google calendar it’s fantastic).

Then I would get curious and pay the 10 dollars or so for the number. Costing me around 30 dollars a year to monitor.

Then I realized if I sign up for my bank plan, which is 3.99 a month, they send me my credit score every month on the first and it costs me about $50 a year. All I have to do is log on. It’s there. No crazy information to fill out, no reporting.

Then I can still log in and get the report if I want to directly through the agency, but I don’t have to every 4 months if everything appears to be in good standing.

I would still recommend monitoring it to some degree. If you are ever going to want to purchase a car or a house it is important to have decent credit to say the least. And if you’re a good consumer and good with your money you deserve to have a good score and report free of mistakes.

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Sara

I have been given my credit score every time I’ve been approved for a loan (most recently, when I refinanced my mortgage). I use Credit Karma to check my score regularly, and my actual score is always quite a bit higher than my Credit Karma estimated score (by 50-70 points, IIRC). I do feel that Credit Karma is sufficient for routinely monitoring my credit. It knows my loan balances and tells me if there have been any hard inquiries on my credit or late payments reported. I would never pay for one of these credit monitoring services.

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Jennifer Carey

I have periodically used credit monitoring systems, but not perpetually. I found them useful after my wallet got stolen – to ensure no new accounts were opened in my name. I also found them useful going through a divorce. Disentangling finances is a challenge and this allowed me to see what i’s I did not dot. Unless you are currently at risk, I don’t know that they are truly a wise investment.

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Rya

We don’t even have such service here in Bulgaria, but if we did, I wouldn’t use it.

I think we all know what makes your credit file look good and what makes it look bad. So INSTEAD of waisting $20 on getting that report, INVEST those $20 towards beating down debt (if you have any) or towards saving.

If you build your savings, you can use them as your start-up capital later so you don’t NEED a good credit rating. You’ll be able to finance yourself.

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Sean Dailey

I would argue against. The reports you get from Experian, at least the ones I was getting, aren’t actual FICO scores. See, I thought I was in the high 600’s but what they were reporting was actually just an estimate because I had a thin file (just started building my credit less than 6 months ago). So when I went in to buy a car, thinking I was good to go based on the numbers I was getting direct from Experian, I ended up getting denied because of the thin file. Plus, there’s no way to cancel your subscription online. You HAVE to call.

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CT

You will not Get Rich Ever if you allow these type of monthly subscriptions slowly drain your accounts. Buy your score once, access your 3 free reports a year (every 4 months do one), use Credit Karma for free, and use the money saved to reduce that debt you’re checking on in the credit report. While you are at it, cancel most, if not all, monthly subscriptions that automatically debit your accounts and get on with Getting Rich.

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Yovimpa

This! And once you start financing yourself (@Rya, below), FREEZE your credit with each of the three agencies. They you don’t have to worry about someone opening a credit card or whatever, even if they do get your SSN or other elements of your digital identity.

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Ben E.

100% AGREE!!

In fact, I have my Google calendar set up that tells me when I need to pull my next credit report.

I don’t pull my score once a year though, just my credit report. Last time I pulled my score, it was excellent. That was a few years ago. Haven’t seen the need to know my score obsessively. If you have a good credit report, your score will reflect it.

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Jim

I use the MyFico service and I think it is worth it. It is, I think, about $ 40 per year. The reporting is superior to the free services (Credit Karma and the other free one – the one that really is free)

I do CreditKarma for free and check my FICO estimate about once a month. I also check my credit report every four months. I recently enrolled in some identity theft protection through Dave Ramsey’s website. It’s $12.90 per month for my whole family and promises to do all the dirty work for you if someone steals your identity. As a former military member, I’m sure my SSN is all over the place. It is on my retiree ID. The government is trying to fix this, though. The next time I get a new ID, my SSN will no longer be on it. The only downside of this is that my ID is good until I turn 65, and I’m just about to turn 48. I can get a new one when my wife’s expires in 2014, so I will have to live with it until then.

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Sam

I check my credit report using the free resources, I probably do so once or twice a year or if something is going on (like our refi last year). I did buy my FICO score before our refi last year.

I think credit monitoring might be worth if you’ve had problems in the past, you’ve cleaned them up and you want to avoid future problems.

Otherwise, my plan for credit monitoring is to shred all financial docs, I bring them to work because we have a shred service so that is easy. Limit distribution of my SS number, I had a new doctor office tell me they wouldn’t treat me if I didn’t give them my SS number so I decided not to use that doctor (SS numbers theft and reselling is big in doctor’s offices and there is no reason they need your number).

And while I pay almost all my bills on line I receive all my bills in paper format and I review them and I question odd charges. I recently called my city because I had some weird small charge on my debit card statement and I couldn’t figure it out, doesn’t matter if its small or not (scammers often try to put through small charges first) and it turned out it was parking at the beach.

Even if you don’t plan to get a loan any time soon, credit scores can impact insurance costs and other non loan costs so its still important to keep an eye on it.

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John

Credit monitoring companies seem like a scam but what about companies like Life Lock? They seem more legit but are they worth the cost? Anyone have any thoughts?

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Samantha

Definitely not worth it. You can call the credit reporting agencies yourself and get your credit locked down for free (or very cheap).

I did this when my purse was stolen. It was free when I submitted a police report to them. I got a very long pin code that I needed to use to unlock my report, if I was applying for credit myself.

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Lincoln

I think it’s like any other purchase. Whether or not any purchase is “worth it” depends how much you get out of it.

For me, I negotiate a lower annual rate for one of these credit monitoring services and I use it every month. I like that it notifies me whenever anyone pulls my credit report or anyone opens an account up under my name. I like that I can carefully examine what’s in my credit report and check for inconsistencies. I’ve had to contact the credit bureaus on at least two occasions because accounts that were paid off were still listed as “open.” For example, if you have loans that are transferred to a new entity, sometimes the loan is counted twice instead of once.

So I guess I feel like I get my money’s worth, but I can see both sides of the coin (pros and cons)

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Mrs PoP @ Planting Our Pennies

Ha! Ask me in a few months when I figure out what the heck is going on with someone filing for unemployment in my name (NOT ME!). Just happened yesterday.
Unrelatedly (I believe), I started using creditsesame.com’s free credit report monitoring system a few weeks ago. It hasn’t shown any fraud, and there is nothing of note on any of my credit reports, which I checked personally after I found out about the unemployment scam.

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